The Housing Bubble

Oh God, I ‘do’ recall that! Pretty juvenile ( funny… but, juvenile! ) that’s actually not that far from me so we got a local belly laugh out of that one?

The pigs-in-foreclosure-home story is definitely a ready-made housing bubble classic.

If only he’d dressed the pigs in little banker suits.

The problem is the pigs were locked in the house with no food or supplies.

It’s not like he let them in there for a day and then let them go, etc.

Sfbb!

Oh Lord, that would have hit the trifecta! ( Nice touch btw? ) In fact going forward, ‘that’ is exactly how I’m telling the story!

When I went to Cuba, the next-door neighbor of the person I was visiting was raising pigs in their earthen basement. From what I heard, it was quite common over there, but man, imagine having a herd of pigs directly below you! (Insert apartment rental joke here).

Unfortunately I’m going to miss it. This afternoon we’re hitching up the 5th wheel and hauling a$$ up to VT for a family reunion this weekend. I look forward to what my chronically underemployed, housing is an investment believing family and friends will have to say this year. Probably not much but I won’t hestitate to torture them with housing reality.

If the DC meetup has the time, I suggest you take a stroll over the Chesapeake and check out Sussex Co. Delaware. Its a HBB dream date. Lots of 4 sale, lots of mcmansions, lots of foreclosures and evaporating stupid talk.

They’ll probably roll their eyes because you don’t know about the “recovery.” lol

Yeah, this whole “face-to-face” meeting thing gives me the creeps. Who wants to emote in the flesh when you can use handy punctuation marks to achieve the same end? ;-\

We all have different wake up schedules. The puzzle pieces didn’t present a picture to me until early 2006. Then it was OMG! It takes something dramatic to shift one’s thinking more than about 10%.

“different wake up schedules”

Further, there’s a great divide between intellectually being able to comprehend a concept ( and preparing yourself emotionally to DEAL with it! )

Typically we respond here by saying “Oh and wasn’t ‘that’ just altogether too predictable!?” ( as if we’d predicted it to begin with? )

Is it possible.., is it just possible, we’ve all become CUBS FANS!?!

“We all have different wake up schedules. The puzzle pieces didn’t present a picture to me until early 2006. Then it was OMG! It takes something dramatic to shift one’s thinking more than about 10%.”

“Further, there’s a great divide between intellectually being able to comprehend a concept ( and preparing yourself emotionally to DEAL with it! )”

Yes, gentlemen, I remember those days well. Glued to every last post of this blog and often drinking a bit more than usual as moving the needle past that more than 10% was something that was very depressing. Acceptance and moving on is actually a better place but the trip through that acceptance was rough.

“The REAL problem with the idea that inflation is our way out of this mess is that inflation places severe upward pressure on mortgage rates.”

I think that’s the game, Jim. Cause enough inflation to pay off debts, but at a slow enough rate to keep quickly rising rates from being an issue while releasing housing inventory at a snail’s pace.

The only deflation I’ve seen is houses and wages. Everything else has risen by double digits in my state.

Well, I see taxes going up everywhere, but not gas, not food (except at the bankrupt store closest to me, darn), not clothes. As a matter of fact, I have bought nothing but the bestest of clothes for cheaper and cheaper prices for the last couple years. They keep sending me these great gift cards in the mail, like “Save $30 on a purchase of $70 or more”. Can’t beat that dude.

Friend of ours says he bought a policy that guarantees no excessive end-of-life medical expenses. He says the policy was issued by Smith & Wesson.

I’m afraid that one of my relatives, who is in failing health, may use the same insurance policy. All I can say is, I hope he doesn’t take anyone else with him (aka murder-suicide).

Rolling down Wall Street with a shot gun?

A long walk into the ocean is a lot less messy. No one even has to look upon your work.

As kids we used to tell each other to go take a long walk off a short pier. I’d consider it but I’m hoping to go death by massive heart attack like one of the guys I used to sail with. I won’t bankrupt my family.

Trouble is one might lose the power to pull the trigger. Timing is everything! Yeah and don’t make a mess.

I quit drinking in 2004. If I ever decide to do myself in, it’s going to be with pills and booze-lots and lots of booze. Oooh! I’m getting kind of excited thinking about it!

Good move, awaiting wipeout.

When it comes to the housing bubble, I also tend to be a bit of a blabbermouth. Especially when it comes to demolishing widely-held notions like “Housing prices are about to go up again!”

I calmly ask how, in light of a sluggish, jobless economic recovery and the presence of a lot of unsold inventory on the market, can any sort of increases in house prices be justified.

I have yet to hear a cogent answer to that question.

When (if) I retire I’d love to go to get-rich seminars and blurt out stuff.

I think you should do it now, Montana. Why wait until you’re old to blurt?

Arizona Slim,

That’s very interesting, I had no idea there was such an event dating all the way back to 70’s?

One of the Patrick.net regulars noted that while on vac. from the BA during ‘04/’05 in Spain that the “No hablas” ( Brit “football fans” on the dole there ) were a -total- disgrace! Drunk by noon, rude to the locals, constant brawling. Just shameful.

It’s taken a number of decades to debunk ( and there still are ‘believers’ ) but the whole concept of the Ugly American never really existed. Hate to disappoint!

Even if we exclude the football hooligans from the equation?

palmetto,

It would be ‘propaganda’ ( if it hadn’t worked! ) Or was it all just staged, just like our moonwalk and 9/11?

Very interesting video and well worth a few minutes to understand how that might work btw )

Personally, I was curious about the jump cut just after the detonation, as opposed to continuous video of the flame dying out. The 23 seconds they said it took to shut off the leak wouldn’t have been that long to watch the flame die out. Although my buddy says it might have taken longer to burn off the gas still coming up after the leak was sealed and maybe that’s why the jump cut.

“jump cut”

Right, and the guy in the chem-suit and detetction equip. working the site without any kind of gas mask? Da’ duh da’ duh da’. Just a walk in the park.

Mindful ( this was after three YEARS of spewage! )

“How can the Gulf be made “better” than it was before the spill? Can man improve on nature?”

Perhaps so, depending on how the spill is cleaned up.

The BP leak is a catastrophe, brought on by incompetence and willful negligence. However, oil seepage into marine environments is not primarily the result of marine drilling:

“Although every major oil spill from a tanker or a rig, hitting coastal areas and beaches and killing marine life and seabirds, is a tragedy and causes much damage, it has been estimated that oil spills in conjunction with tanker accidents or oil platform blowouts account for a minor part, approximately 10-15 per cent, of the total annual oil input of oils to the marine environment.

According to a recent report by the National Research Council of the U.S. National Academy of Sciences, the total input of oils to the marine environment is about 1.3 million tonnes per year. The main categories of sources that contribute to this input are:

natural seeps — 46%

discharges from consumption of oils (operational discharges from ships and discharges from land-based sources) — 37%

accidental spills from ships — 12%

offshore extraction of oil — 3%

“Crude oil and natural gas seeps naturally out of fissures in the ocean seabed and eroding sedimentary rock. These seeps are natural springs where liquid and gaseous hydrocarbons leak out of the ground (like springs that ooze oil and gas instead of water). Whereas freshwater springs are fed by underground pools of water, oil and gas seeps are fed by natural underground accumulations of oil and natural gas. Natural oil seeps are used in identifying potential petroleum reserves.

As pointed out by the National Research Council of the U.S. National Academy of Sciences, “natural oil seeps contribute the highest amount of oil to the marine environment, accounting for 46 per cent of the annual load to the world’s oceans. — Although they are entirely natural, these seeps significantly alter the nature of nearby marine environments. For this reason, they serve as natural laboratories where researchers can learn how marine organisms adapt over generations of chemical exposure. Seeps illustrate how dramatically animal and plant population levels can change with exposure to ocean petroleum”.

NOAA describe a natural seepage area in California: “One of the best-known areas where this happens is Coal Oil Point along the California Coast near Santa Barbara. An estimated 2,000 to 3,000 gallons of crude oil is released naturally from the ocean bottom every day just a few miles offshore from this beach”.

http://oils.gpa.unep.org/facts/faqs.htm

I seem to recall that, in his real estate investment career, which he pursued while he was a land surveyor, George Washington purchased a property that had natural oil seepage to the surface of the earth. Even back then, this was a valuable piece of property.

I pulled out my thesaurus which is old, so maybe that’s the problem, but in my 1979 version metaphor does not equal lie.

You are correct. But how can you determine there was a lie? I’ve seen some miraculous environmental reclamation over the last 40 years.

Maybe we can and maybe we can’t clean up the gulf, but I happen to know of some science and technology I can’t share right now that’s looks we have a very good chance.

There is no magical private sector entity out there all geared up to shut down an oil well.

nor is there any magical public sector entity….

If BP won’t/can’t do it, it’s quite possible another oil company/contractor might be able to. Do people really think the gov’t would be more likely to be able to?

The “Obama is a socialeest furriner mole training our children to be good Nazis” think so.

“If BP won’t/can’t do it, it’s quite possible another oil company/contractor might be able to.”

Exactly, drumminj. That’s what I’ve been contending all along. I don’t know why people are so hung up that BP JUST HAS to fix this because no one else can. The truth is, as a practical matter, people and organizations who mess up this bad are not capable of fixing their screw up. Sure, send ‘em the bill, but don’t let them anywhere near the problem. Get ‘em the hell out and get someone else who can do the job, in there FAST. I don’t know how many days it is going to take to prove this. I’m afraid we’re going to have to wait until that relief well fails and that’s not until August, at best.

BP will never fix this.

No, he’s apologizing because he’s a corrupt piece of sh!t pig. Wake up.

Ballots should also be allowed to be “corrected” if need be.

I’m not sure ballots need to be counted at all. An application of the birth/death model should do the trick just as it does the trick in counting up the unemployed.

Or better yet, if you don’t register to vote, then you don’t vote. Same if you’re illegal.

Is this for real?

Kind of an electoral cap and trade. I like it.

“First, let’s address the reading comprehension failure. Not once did I assert in my statement that the United States form of government is a democracy. The only mention of the word “democracy” is in connection with the following statement: “it is a voting method used by many democracies in the world.”

OK, so what was your point in juxtaposition? We should adopt the voting method of democracies in the world? Because that’s what this Portchester experiment in social engineering would seem to indicate. How about a socialist system? Communist, collectivist? Beneficent dicktatership?

“many people, even people vastly more intelligent than you or I, often conflate the two words in casual conversation.”

That’s what scares me.

“But to simply dismiss the idea because it’s new/different/unfamiliar is pure intellectual laziness.”

I dismiss the idea because it is apparently being instituted by DOJ fiat “as part of a new election system crafted to help boost Hispanic representation.” That’s social engineering. I mean, really, what’s next? What about Chinese representation? Indian? Russian? Somali? Left handed people? People with red hair?

How about government mandates on mating to ensure a uniformity of physical characteristics so that in theory, racism or “differentism” no longer exists? Or, as in the Kurt Vonnegut story, permanently maim or handicap the physically and mentally fit so that all are at the level of sub-moron? We could then have true equality.

“Bottom line new/different/unfamiliar is not always BAD.”

True, but when it is, toss it out. I looked at this, and found it bad, not because of what it was, but because of the purpose.

Palmetto -

Is it not up to states and municipalities to determine their own voting methods - either pure democratic or not? Sure, at the federal level we’re a constitutional republic, but that doesn’t mean that states can’t elect their local leaders via popular vote…

I for one like the idea of being able to rank candidates, rather than just picking one from the pile.

“Is it not up to states and municipalities to determine their own voting methods”

Apparently not, because according to the article: “Furano cast multiple votes on the instructions of a federal judge and the U.S. Department of Justice as part of a new election system crafted to help boost Hispanic representation.”

Based on that, I’d say the federal judge and the DOJ is decreeing what voting methods citizens should use.

Based on that, I’d say the federal judge and the DOJ is decreeing what voting methods citizens should use.

I think that is a singular exception rather than the rule. One could argue the DOJ and federal judge are overstepping their bounds.

If only some states had stood up for their rights at some point to put a stop to this early on….(oh, wait…)

Again, the failure of reading comprehension is staggering. Furthermore, while it is rhetorically effective to (1) pretend the other person makes a ridiculous argument when he did not, and (2) to criticize the ridiculous argument that the person never makes as ridiculous, it’s not very constructive to advance ideas.

Now to the merits; first, nobody ever advocated that all people should be “equalized.” In fact, I quite recognize that most people are not equal. This is a ridiculous idea to attribute to my above post.

Second, the real idea of cumulative voting is in fact a more fair representation of the population. Take a simplified example, assume a town has only two voting blocs of 60% (bloc A) and 40% (bloc B); further assume that the population is distributed uniformly; finally assume that the town’s counsel has 5 seats. Under the common U.S. winner-take-all system, the town would be divided into five districts of equal population, and each district would elect a representative. Because bloc A dominates in each of the districts, the town would have a government consisting 100% of bloc A’s choice.

Now, under cumulative voting and holding the entire town as as single district, it is far more likely that bloc B will at least have SOME representation in the government. It is far more likely, therefore, to end up with a government of 4 seats from bloc A and 1 seat from bloc B. This apportionment, at least to me, is far more fair and more representative of this hypothetical town’s population.

Finally, under the U.S. Constitution, Congress has the power under Article IV, Section 4 to mandate how states run elections, if Congress feels that a particular state’s election method does not provide a republican form of government. The Supreme Court, in Luther v. Borden, 48 U.S. 1 (1849), held that “republican form” of government is a political question left entirely up to Congress and the President to interpret, and will not review Congressional determination. Another source of power for Congress to interfere in states’ political process is under Section 5 of the 14th Amendment to address past racial discrimination in a (formerly) racist district. That was the source of power for Congress to enact the Voting Rights Act. Under that law, DOJ indeed has the power to address racial discrimination in the political process and the federal courts have the power to fashion a remedy.

You like it, I don’t. Case closed. Besides, who cares? I just saved a bundle on my car insurance.

I’m done with you.

NJRenter - I sure hope you are one of a kind. God help us.

Whoa, posting twice, because the first rebuttal wasn’t belittling enuf! Score one for the Palmster! I lived in the Northeast/Middle Atlantic for a long time and I’m very familiar with the “intellectual meritocracy” crowd and the arguments for social engineering. I almost bought into it, too, until I (unfortunately) became familiar with the personal lives of some of the said “meritocracy”. Not saying this applies to you personally, but the slick veneer over a core of depravity is not to be believed.

All kidding aside, Renter, why don’t people just move to countries or areas where they are better represented? If Africans, Asians, Hispanics, Indians, whatever, feel this system here is not compatible with who and what they are, why not stay in or go to Africa, Asia, South America/Central America/Spain/Mexico, India, where they are represented in the majorities and their languages are spoken and their cultures in evidence?

Maybe you should move to Australia, where they don’t have as many Mexicans?

Knockwurst, that’s absurd. You are comparing apples to oranges.

Person A moves from one country 1 to country 2, presumably because country 2 is “better”, but then rejects the culture, refuses to assimilate, and acts like a general wanker. Person A has declined to participate in any political system that might have made country 1 any better and has also declined to participate in making country 2 any better.

Person B already lives in country 2 and likes it, so they don’t move to country 1. They embrace the culture, attempt to be a productive member, and are not a wanker. Person B participates in the political system that keeps country 2 great, and is not concerned with country 1.

The two people are different.

So, those trumpeting the ownership society really don’t want anyone to actually own anything?

Ok, check - glad we got that straight.

5% Down? No problem! ( Here’s my credit card! )

Perhaps the biggest stain on Dodd’s career was his connection to Countrywide Financial. Dodd has incredible power as chairman of the Senate Banking Committee, and took extraordinary steps to help Countrywide (and other lenders) by proposing that lenders push $300 billion in bad loans to taxpayers through the Federal Housing Administration.

Was is just a coincidence, then, that a few years earlier the Democratic senator from Connecticut became a special customer of Countrywide, one known affectionately at the company as a “friend of Angelo”? (Angelo Mozilo was Countrywide’s chief executive).

Countrywide helped Dodd refinance mortgages in 2003 worth $778,000 on homes in Connecticut and Washington, Politico reported. Countrywide reportedly waived the points on the mortgages and gave special interest rates that experts said likely saved Dodd about $75,000. (Dodd’s office says the savings were much lower.)

Dodd admitted that he had received special treatment, but told reporters that he regretted ever having done business with the company. Or is it that he regretted getting caught?

It’s amazing that these politicians are willing to screw the country for such a small sum of money. Maybe there was more that we just don’t know about. Family members etc getting kickbacks.

I hope Peter Schiff bitch slaps that sleezeball in November. He IS the housing bubble poster child.

CarrieAnn,

Not necessarily. Well, yes it would but what I see developing is really (2) markets? If you want to commit to the 30 yr. Dbet Trap, ‘these’ are the homes/areas you can look at.

If 10 or 15 is more to your liking.., then there’s pre-fab/modular etc. We need to totally reshape the way the REIC thinks.

30-yr with proper underwriting is just fine with proper underwriting (e.g., 10%+ downpayment requirement, income verification, cap of 30% of household income paid towards mortgage). If these prudential underwriting standards had been upheld, we would not be in bubble-ville today.

CIBT,

No doubt.

While it’s something I’m still milling about in my own mind.., the problem the REIC must address is that, younger couples now see the Debt Bomb. They have little to no job security ( they’re young not ’stupid’ ) and getting them off the fence is going to be next to impossible!

Right now my SIL & daughter are looking at raw acreage and building their own home ( one 2 X 4 at a time! ) I don’t belive this new mindset is in any way ‘unique’ to them?

Unless and until builders and developers can conjur up NEW methods to place first-time buyers on a true path to ownership, I believe ‘that’ aspect of The American Dream is deader than a door nail.

Nope. Never had a 30 myself, and I’m free and clear.

“I think 10 yr or 15 yr period mortgages kind of make sense from an economic cost standpoint.”

My dad has an old friend who became a corporate exec at a major agribusiness firm. His advice to my dad: ‘Never get into a mortgage with a term that extends beyond ten years.’

Let’s look at my example above through the lens of a ten-year mortgage (assuming we are in 2010 and the home can be bought for $400,000):

Downpayment = 20% * $400,000 = $80,000
Loan principle = $400,000 - $80,000 = $320,000
Ten-year fixed rate mortgage at 4% = $3,239.84
Total payments after ten years =
12*10*$3,239.84 = $388,780.80
Interest payments after ten years = $68,780.80
Interest as a share of total monthly payments =
$68,780.80 / $388,780.80 = 18% of total payments

Conclusion: The 10-year fixed rate mortgage is financial innovation you can believe in.

Because we must save banks from prepayment risk? Because prepayments were what caused the current crisis? This is SO reminiscent of the Maestro’s shilling of ARMs during the bubble.

DennisN
Good for you. Isn’t it nice to actually “own” your home, free & clear! What a rare concept to most sheeples.

And in the interest of full disclosure, I’m currently paying year 7 of a 15 year mortgage. After all, 15 year fixed rate or ARM mortgages are options for those who want them. But I think that one of the real CAUSES of the bubble was treating 2 year ARMS as if they had a risk profile more like a 30 year FRM rather than a 1 year ARM. Say what you will, a fixed rate mortgage is less risky for the borrower. They can and do PAY for that reduced risk with a slightly higher interest rate, but the chances of default are measurably less.

Yes, that was indeed very common in the blue collar hoods and suburbs.

Fast forward to 2008 - some bastions of outright ownership - like the northwest side and Niles, IL were seeing large increases in foreclosure - the culprit? HELOC.

It seems even some of those rock solid blue collar no nonsense homeowners couldn’t resist the sweet nectar of the HELOC. Anecdotely, the typical offenders seemed to be Boomers raiding grandma and grandpa’s equity.

Talk about taking a step backwards!

“couldn’t resist the sweet nectar of the HELOC”

Right, like it was some kind of primal urge. So long to outright ownership! ( I mean what ‘good’ is having a house if you can’t tap it? )

HELOC makes me laugh. Fools. I remember a few years ago on special interest/hobby boards were someone was asking for advice on which spendy new bike/gun/guitar to buy because he was coming into some cash in a few days, as soon as the paperwork was signed. It got to be a regular pattern.

Years ago I figured out couples play this game, “I won’t say anything if you buy X if you don’t say anything if I buy Y…”

Sean,

Firstly, I ‘do’ hear you! More importantly, I’m ‘with’ you. I kind of fall out favor w/ the boomers myself and def. connect more w/ the WWII gen.

But I think you’ve got it a little backwards here? Remember, at the height of the boom lenders were even entertaining the idea of 40 and even 50 YEAR! mortgages! ( Nothing like fighting insanity with MORE insanity huh? )

My position has always been that even a ‘30′ isn’t realistic. Working off the assumption each and every one of us will get thru 30 yrs. without being sick ( divorced? ) or laid off is perfectly ridiculous! We should have begun trending toward a ‘20′ ever since wages stalled out! Had prices remained within a sane range ( would contemplating a 50 yr. mtg. even been necessary? )

Not me. That was when I entered the job market, and gawd was that a struggle.

But then again, I’m part of the Generation Jones that got the short end of every Boomer stick.

Slim, as a fellow Jonesette, can I buy you coffee when I get to AZ? Eventually I will get my license and move there, likely in August.

Slim, as a fellow Jonesette, can I buy you coffee when I get to AZ? Eventually I will get my license and move there, likely in August.

I’m not a coffee drinker, but I’d be happy to join you for at the Epic Cafe.

I predict that the public option is going to be back, and in a big way. On what do I base this prediction? Here goes:

1. Private health insurers, seeing that the current health care reform bill has made them the only game in town, continue with their double-digit rate increases. Which leads to businesses and individuals dropping coverage and loudly proclaiming this fact to their elected representatives. Who, upon hearing this news, are prompted to do something. That something would be the public option.

2. The people who were advocating for the public option haven’t gone away. Not by a longshot. I think that in the coming months, their advocacy will take on a forcefulness that it didn’t have before.

3. The Gulf oil spill. Lots of people losing jobs, and, by extension, health insurance. The Gulf area residents are already being pretty vocal about a lot of spill-related issues, so look for access to health insurance and care for oil-induced illnesses to be added to the list.

BS

Facts aren’t debatable.

Here are the facts-

Nixonian/Palenite George Bush took office with;

4% unemployment and trending down
A budget surplus
$5 trillion national debt
A world at peace

Nixonian/Palenite George Bush left office with;

8% unemployment and rising, a 100% increase
A $1.3 Trillion budget deficit for 2008
A doubled national debt to $10 Trillion
Two failed wars and 800,000 dead human beings

Now those are indisputable facts but lets look even closer….

George Bush and his GOP majority enacted the Zero Downpayment Act. He didn’t stop there… oh no… he and his realtor friend GOP Rep. Johnny Isaakson in conjunction with Texas based builder Centex passed the American Dream Low Downpayment Act.

Now unless you intend to always live your life in a crisis mode in fear of your own manufactured frankensteins and hobgoblins, you have to learn to actually look at the facts and reality of the situation before you run your cake hole. The simple fact is that Bush inherited a country at peace, a budget surplus and low unemployment and left office with 2 wars, a $1.3 trillion deficit and an economy on the brink of a great depression.

“Facts aren’t debatable”

And when you get some please let us know!

Kinda’ conveniently left out 9/11 there didn’t ya’ sport? The last thing I need today is being forced to respond to some derailed political rant but no one in good conscience can let that slide.

Calm down, take a deep breath. We’ll work thru this together!

Go away. I said two words to you a week ago and now you’re hangin around like a bad penny.

800,000 dead?

and the world was most certainly not at peace or we would not have been attacked.

“hanging around like a bad penny”

( Read, my frankenstein and hobgoblin “facts” are not to be challenged in any way! )

Pffftt, whatever. And that 800k # has been lingering around for the last 4 or 5 years ( don’t want to make it sound ‘too’ fantastic? ) Talk about a bad penny?

For the first time in a long time, you’re losing your bravado. What’s a matter, Polls got you down? To be truthful, my last hiatus was -because- of you. Or the Mrs. I get confused. You come here everyday with the same… tired… ‘agenda’.

Good…. take another hiatus BadPenny.

Pink-eye sore?

Pepto Palace?

Pepto Palace?

We have a winner!

And thanks for bringing this up, Bear. All day long, I’ve been thinking that the color reminded me of something, but I couldn’t figure out what.

That something is named Pepto-Bismol.